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Multiple Choice Quiz
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1
A reason for acquisitions is synergy. Synergy includes:
A)Revenue enhancements
B)Cost reductions
C)Lower taxes
D)All of these options
2
If Coca Cola acquired Pepsi, it would be an example of a:
A)Horizontal merger
B)Vertical merger
C)Cross-border merger
D)Both A and C
3
The following reasons are good motives for mergers except:
A)Economies of scale
B)Complementary resources
C)Diversification
D)Unused tax shields
4
Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $75 million. What is the gain from this merger?
A)$30 million
B)$20 million
C)$15 million
D)$10 million
5
Firm A is planning to acquire Firm B. If Firm A prefers to make a cash offer for the merger it indicates that:
A)Firm A's managers are optimistic about the post-merger value of A
B)Firm A's managers are pessimistic about the post-merger value of A
C)Firm A's managers are neutral about the post-merger value of A
D)None of these options
6
The acquisition of stock has the advantage of:
A)Mitigating the effect of overvaluation and undervaluation
B)Minority shareholders may exist
C)Opening the bidding to others
D)All of these options
7
What item is created when a firm is purchased above book value?
A)Retained earnings
B)Net income
C)Goodwill
D)Capital loss
8
The XAP Corporation with a book value of $20 million and a market value of $30 million has been bought by the CDF Corporation with a book value of $6 million and a market value of $8 million. If the purchase price is $26 million what is the goodwill?
A)$30 million
B)$26 million
C)$20 million
D)$6 million
9
The alternative to a proxy fight is a:
A)Tender offer to the shareholders
B)Shareholder derivative action
C)Proxy fight
D)Management freeze-out
10
A modification of the corporate charter that requires 80% shareholder approval for takeover is called a(n):
A)Repurchase standstill provision
B)Exclusionary self-tender
C)Super majority amendment
D)Tender offer
11
An example of a shark-repellent charter amendment is:
A)Supermajority
B)Waiting period
C)Poison pill
D)All of these options
12
In general, who wins in a merger?
A)Sellers
B)Investment bankers
C)Lawyers
D)All of these options
13
Compensation paid to top management in the event of a takeover is called a:
A)Poison pill
B)Golden parachute
C)Self-tender
D)Buyout
14
If payment is in the form of cash, an acquisition is regarded as _______
A)Taxable
B)Tax-free
C)Expense
D)Capital gain
15
Firm A has a value of $100 million, and B has a value of $70 million. Merging the two would allow a cost savings with a present value of $20 million. Firm A purchases B for $75 million. What is the cost of this merger?
A)$30 million
B)$20 million
C)$5 million
D)$10 million





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